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  • Writer's pictureMark Watson-Mitchell

Small Cap catch-up: SYS, ZIN, GPH, CNIC, BGO and CODE

SysGroup (LON:SYS) – massive cross-selling potential

On Monday morning this provider of IT services, cyber security and cloud hosting declared its interims to end September.

They showed revenues up 49% at £11.32m, adjusted pre-tax profits of £1.10m (£0.96m), with earnings coming out at 2.0p (1.5p) at the halfway stage.

Due to recent acquisitions the £15m group’s first-half annual recurring revenue rate slipped from 86% to 75% on its Managed IT Services side, but that will return to growth.

The group’s Outlook comment noted that there is further potential for client growth and cross-selling.

It also stated that it is assessing various acquisition opportunities, to help it to further its ambition as a consolidator in its highly fragmented market.

Confidence remains that current year trading will be in line with market expectations.

Analysts Bob Liao and Carl Smith at Zeus Capital, the group’s NOMAD and Broker,

estimate that the year to end March will se revenues rise from £14.7m to £20.5m, while adjusted pre-tax profits will increase from £2.0m to £2.4m, lifting earnings to 3.7p (3.4p) per share.

The brokers note that 68% of its customers take only one or two of the group’s five core managed services – meaning that there is considerable scope for cross-selling.

Zeus Capital has a 58p per share valuation on SysGroup shares.

On the basis of such estimates, this group’s shares are really quite appealing, trading at just 30p which puts them out on only 8.1 times current year earnings – that is too low for such growth potential.

(Profile 22.06.22 @ 26.5p set a Target Price of 34p)

Zinc Media Group (LON:ZIN) – really tuning it up for next year

This award-winning television, brand and audio production group issued a Trading Update detailing that revenue booked and anticipated to deliver in the year to end December will be greater than market expectations.

It is now looking for the full year to see £28.0m against £17.5m for last year.

Furthermore, it is apparent that revenue bookings for next year are showing up well, while plenty of other negotiations are at advanced stage and positive for early 2023.

The recently acquired The Edge is performing far better than expected and is fitting in well inside the Zinc Media Group.

Analysts at the group’s NOMAD and Broker, Singer Capital Markets, are rating its shares as a Buy, looking for a twelve-month price objective of 163p, almost double the current price.

Their estimates for the current year are for revenues of £28.0m (£17.5m), with adjusted pre-tax losses reduced from £1.7m to £1.4m.

For the coming year they see £35.7m sales, together with a significant fall in losses to just £0.1m down.

For the 2024 trading year revenues could well rise to £39.1m and produce a healthy £1.0m profit, worth 4.7p per share in earnings.

For the time being I would be delighted to see the shares recovering to trade the levels of before The Edge Picture £6m acquisition way back in August, before the £5m Placing at 100p a share, which was 107.5p.

Taking a medium-term view, this £18m group’s shares at the current 85.5p have yet to respond to the prospects for the growth to come.

(Profile 25.04.22 @ 117.5p set a Target Price of 148p)

Global Ports Holding (LON:GPH) – cruising swiftly into 2023

The market has reacted well to the news a week ago that the world’s largest independent cruise port operator has just won the contract to manage cruise services at Prince Rupert Cruise Port in British Columbia, Canada.

The ten-year concession, with the option to extend for another ten years, clearly shows that this group has no borders for its operations globally.

The Prince Rupert Cruise Port, next to the Alaskan border, serves smaller cruise ships – some 41000 passengers were served this year.

Global Ports has ambitions to double that figure in the 2023 cruise season, while being determined to help promote the local heritage, culture, gastronomy and diverse plant, animal and marine life of the Great Bear Rainforest, which will enhance the Prince Rupert as a ‘must-go’ destination.

This new concession expands the group’s spread significantly. It currently operates 26 cruise ports in 14 countries across the Caribbean, Western Mediterranean, North Europe, the Adriatic, Eastern Mediterranean, and Asia.

The group currently handles some 8m passengers through its ports, while it is expected to build up to 11m next year.

Within the next couple of weeks or so the group will be announcing its interim figures to the end of September.

Analyst Greg Johnson at the £59m group’s brokers Shore Capital is estimating that the year to end March 2023 will see revenues leap from $40.3m to $106.5m, with the $43.4m adjusted pre-tax loss of $43.4m last year being cut by two thirds to just a $15.4m loss.

However, for the coming year he sees $153.3m revenues helping to earn the group $15.5m profits, worth 5.8c in earnings per share.

The group’s shares closed last night at 94p, a 12.5p improvement in just eight trading days.

Hold very tight for significant gains in 2023.

(Profile 11.11.22 @ 81.5p set a Target Price of 100p)

CentralNic Group (LON:CNIC) – a DCF of 210p against current 123.5p

The third quarter results to end September showed record revenues and EBITDA figures and slightly better than expected.

Did you know that this £354m group has upgraded revenue expectations six times since the beginning of last year.

What is more it has also upgraded EBITDA expectations four times in the same period of time.

Broker Zeus Capital states that

“We believe CentralNic is well positioned to strongly grow earnings through organic growth, operating leverage and acquisitions. Its unique cookie-less marketing platforms are taking market share, the company’s scalable business model is converting high growth to strong margin expansion and its recently negotiated debt facility and strong cash conversion support further earnings accretive acquisitions.”

The broker considers that the group’s DCF valuation is 210p, well above the current share price of 123.5p.

You must know by now just how much I like this company and its potential – so I will not repeat myself, apart from saying that at just 8 times earnings its shares are massively undervalued for such a money machine.

(Profile 12.07.21 @ 89p set a Target Price of 110p*)

Bango (LON:BGO) – getting the picture

Investors following this £145m data-driven commerce platform group might like to know that tomorrow (24 November) will see a Technology and Market Strategy session being held by the company at Farringdon, in the City.

The event starts at 2.30pm and will focus on the group’s products and technology and how it looks to win in the market – plus there are drinks and canapes for the thirsty and hungry punters that attend.

If you miss it, then just go to the group’s website later in the day to see the presentation.

The shares are 192.5p, not far short of its year’s trading High.

(Profile 05.09.22 @ 198.5p set a Target Price of 250p)

Northcoders (LON:CODE) – quick funding went well

Monday’s oversubscribed Placing of £2.1m of new shares @ 300p each looks to be a very sensible move.

The funds will be used to accelerate the software coding training programme group’s strategy to introduce courses for four new disciplines: cyber security; platform engineering; quality assurance; and agile project and product management.

In addition, the group will be investing into NCore, its core technical delivery platform.

Chris Hill, CEO, stated that:

"Northcoders has delivered significant financial and operational progress since our IPO and we continue to cement our reputation as one of the UK's leading technology training providers with a flexible hybrid business model that can meet both the demands of individuals and corporates alike.

We are delighted with the positive response we have so far received, from both new and existing investors, for our plans to accelerate this growth.”

Prior to the Placing brokers WH Ireland were going for the current year to end December to see revenues increase from £3.0m to £6.5m, with adjusted pre-tax profits leaping from £0.1m to £0.8m, lifting earnings up to 9.6p (3.0p) per share.

For next year analyst Nick Spoliar was looking for £10.5m sales in 2023, with profits quadrupling to £3.2m, worth 36.6p per share in earnings.

But those guesstimates were all before this week’s fundraising and the benefits that could accrue in due course.

At the current 315p the £21m group’s shares look more than capable of rising back through my price aim in 2023.

(Profile 28.01.22 @ 296p set a Target Price of 370p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)

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